Shaky spending, eroding margins fuel dealer concerns: Baird/Dealernews survey

Publish Date: 
Jan 15, 2013

WITH THE EXCEPTION of Harley-Davidson and other pockets of growth, most powersports retailers reported sluggish sales September through December, blaming poor business conditions caused by shaky consumer spending, discounters, lackluster products and stocking pressure from their OEMs, according to the results of the Baird/Dealernews Q4 Powersports Dealer Survey.

“The culmination of the election and fiscal cliff decision haven’t eased dealers’ concerns about the economy and customer spending,” said Craig Kennison, senior research analyst with Baird. “Still, we believe consumers may become more willing to spend if monetary policy creates the impression of equity in the housing market. Dealer sentiment indicates that the environment remains difficult, with skinny margins and economic uncertainty — but fresh products from some manufacturers continue to fuel optimism among some dealers.”

The main findings:

  • Side-by-side was the only vehicle category to increase in retail sales among surveyed dealers. The growth was weighted toward Polaris and Can-Am, with dealers especially excited about the Can-Am Maverick introduction. At the wholesale level, “the prior appetite for side-by-side inventory looks somewhat satisfied, with dealers noting many OEMs have been shipping units in the off-season,” Kennison said.
  • Motorcycle sales were nearly flat. Sales among the Japanese brands cancelled out robust Harley sales. “Harley dealers were among the few to voice concern about inventory levels being too low and even noted lost sales due to excessively lean stocks,” Kennison said.
  • Warm weather and lack of snow plagued sled sales. “Snowmobile stocks are heavy as winter weather didn’t materialize in many markets,” Kennison noted. Some dealers, however, reported better trends in December.
  • Service revenue and PG&A sales remained flat across most dealerships, “making an already competitive environment more difficult for dealers relying on those higher-margin areas to boost profitability,” Kennison said.
  • Inventory is nearly balanced in many categories. “But apprehension about consumer spending leaves dealers less comfortable with inventory positions,” Kennison said. “Dealers expressed frustration with an absence of rebates and a lack of innovation (for most brands) to drive customer purchases.”
  • Polaris dealers overtake Harley dealers in happiness. The Baird/Dealernews Powersports Dealer Sentiment Index turned slightly favorable but remains weak, indicating a mixed outlook in which brand continues to matter. Polaris dealers reported being the most optimistic. Harley dealer sentiment declined from its industry-high levels in prior quarters, perhaps due to the inventory problems.

Baird asked dealers to comment on their top issues for the powersports industry in 2013. They frequently mentioned customer spending, government activity, and margin erosion as major concerns for the upcoming year. (continued)